Judge rejects Skunk Train owner’s claim it is a public utility with right of eminent domain

A Mendocino County man who spurned the owners of the Skunk Train when they tried to force him to sell them his land has prevailed in a grueling three-year legal brawl that left him saddled with debt.

At issue was whether Mendocino Railway, operator of the popular excursion train, is a public utility with the right to take property through eminent domain and whether, in its effort to buy 20 acres from a man named John Meyer, it attempted to do so in order to serve the public good or it own private interests.

In deciding the case in Meyer’s favor, Mendocino County Superior Court Presiding Judge Jeanine Nadel delivered a punishing blow to Mendocino Railway, chipping away at its claims to hold power above and beyond most private companies and potentially undermining its position in several unsettled cases.

The closely watched court case has potential implications for other controversies in which the company is embroiled.

For Meyer, whose victory has put him on the receiving end of congratulations, it remains difficult to feel the fight is over after a grueling, three-year legal brawl that left him in substantial debt.

The plans for his 21 acres on the outskirts of Willits have been on hold for three years, and his partners have moved on. Construction costs, meanwhile, have risen so dramatically that development costs have doubled, he said.

“It’s been a nightmare,” said Meyer, 50.

“It’s been worse than limbo,” he said. “I guess limbo is between Heaven and Hell. I’d be closer to the Hell side.”

Though he expects a final judgment will include reimbursement of attorneys’ fees — now “in the neighborhood of $250,000” — he doesn’t know when that might come or how an appeal might affect it. In the meantime, the fact that action is still pending against his land blocks him from borrowing money for development. He’s behind on his mortgage, as well.

“I have literally put everything I own on it,“ Meyer said. ”I’m still in a horrible position.“

Judge questions CEO’s credibility

In her ruling, the judge directly questioned the credibility of Mendocino Railway President and Chief Executive Officer Robert Pinoli, the only witness. She noted that initial plans for the property included a train station, as well as a campground and long-term RV rental park that did not satisfy the three-part test for use of eminent domain, which allows its exercise only in the public interest and when the land is required for a given project “compatible with the greatest public good with the least private injury.”

Mendocino Railway has become entangled in several high-stakes issues in recent years, including the future of the Great Redwood Trail planned for former North Coast Railroad tracks from Cloverdale to Humboldt Bay.

The railway also is in litigation with Fort Bragg and the California Coastal Commission over its rejection of their attempts at land-use regulation, pursuing relief along two tracks in U.S. District Court, in hopes of securing a declaration it does in fact hold public utility status.

The railway claims it stands apart from most business interests — exempt from many common land-use permit requirements and able to acquire land through eminent domain — despite statements from the California Public Utilities Commission as recently as August saying that the commission’s regulation of the Skunk Train for safety reasons doesn’t make it a public utility.

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The railway also over the past five years has acquired about 375 acres of mostly undeveloped coastal property in Fort Bragg with the potential to transform the seaside town, once anchored by a defunct Georgia-Pacific lumber mill, which sprawled across the same site.

Much of the mill site was purchased under the threat of eminent domain, an authority Nadel’s ruling has now brought into question. In it, she cited insufficient evidence to demonstrate the railway was a “public utility” with the power to condemn land — “the central issue in this case,” according to her April 19 ruling.

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West Sonoma County resident Caryl Hart, chair of the Great Redwood Trail Agency Board of Directors and vice chair of the California Coastal Commission, has followed the Meyer case, given multiple points of common interest. She also has a law degree.

The ruling against Mendocino Railway “is very damaging,” Hart said.

Nadel still has to deliver a final judgment in the case. Mendocino Railway also may appeal the ruling.

Pinoli, the president and CEO, said the railway was “in the process of determining our next steps.”

Nadel’s decision, he said, “seems to not take evidence and facts into account.”

Thought it was junk mail

Meyer, who lives in Branscomb with his wife and 5-year-old daughter, had purchased the 20 acres at issue in 2014 with plans to rebuild a soil business he had operated a few years earlier.

He said he has a contract with Caltrans through which he accepts earth recovered from landslides at the Highway 20 property a mile or so west of town, where he screens and separates the materials with equipment bought for the purpose so it can be resold as fill for construction sites.

He also planned to build two rental homes and in early 2020 was negotiating to buy an adjoining acre so he could get a lot line adjustment and build four houses total, plus a few workshop buildings.

Then what he thought was a piece of junk mail arrived in June 2020.

It turned out to be a letter from Pinoli inquiring about his interest in selling the property, bordered by the curving highway and the railroad to the south.

Meyer did not reject the proposal outright. There was some initial back and forth about prices and plans, and maybe a trade. He also says he offered to sell the railway several acres — enough to offload people and goods and put parking — but that offer was rejected.

Meyer already had invested about $350,000 in the two properties. He had plans for the site, and well and septic permits, plus the equipment and profit potential for the soil business. He also very quickly realized he needed to retain a land-use attorney at some heavy initial cost.

But Mendocino Railway was only prepared to pay $450,000 or $500,000 for the 20 acres, Meyer said, and he wanted more than twice that because of what he had invested and had planned. And he didn’t really want to sell.

But he said he would have settled closer to what the railway offered, but Mike Hart, head of Sierra Railroad Company, Mendocino Railway’s parent company, said he could get the property appraised at $350,000, which would force Meyer to accept that price.

Railway’s growing footprint

At the time, the railway had been exploring ways to grow its footprint and expand its business potential. In 2019, it acquired 77 acres of the old mill site around its Fort Bragg depot site, as well as 15 acres once intended for a new Harvest Market store.

The next year it acquired a residential property on the opposite side of town through eminent domain for “maintenance and safety of rail operations,” paying $155,000 to an elderly woman through her daughter, according to the condemnation order.

A year after that, in 2021, Mendocino Railway sued Georgia-Pacific under eminent domain, demanding it relinquish the remaining 210 acres from the mill site and another 62 acres along Pudding Creek to the north. The case was settled before trial, with Georgia-Pacific agreeing to accept $1.23 million for the land, which came along with substantial liability for toxic remediation. Nadel was also the judge in that case.

The mill site acquisition was an infuriating surprise for city officials, who thought they had been close to a deal for the land themselves after working most of 20 years to chart a path for the city’s future based on a new, “blue economy” around aquaculture, ocean resources and climate resilience.

The mill site settlement stated the property was “necessary for construction and maintenance of rail facilities related to Mendocino Railway’s ongoing and future freight and passenger rail operations … a public use.”

Right away, questions were raised about the railway’s need for so much land — about a fifth of the city’s real estate — after it had been operating on just four acres.

There also were worries about ambitious plans for development near the coast, in the jurisdiction of the California Coastal Commission, and whether the railroad planned to abide by city and state permitting standards in fulfilling its vision for housing, commercial and tourism-serving uses like hotels, restaurants, a gazebo and viewing area on the coast.

Pinoli had already rejected city efforts to enforce permit requirements on improvements on the northern part of the mill site and said plans to run the Skunk Train line out to Glass Beach and along the coast would not be subject to environmental review, despite the extra layer of oversight required by the California Coastal Commission.

After several warnings, the commission’s enforcement arm filed a notice of violation against the railway last summer related to some mill site work that could cost the railway up to $11,500 a day in civil penalties. Collection is on hold pending resolution of three court cases involving the commission and the railway, Enforcement Director Lisa Haage said.

Mendocino Railway has been trying to have all the cases heard in federal court, and there’s been a delay while a federal judge decides.

But Alex Helperin, chief deputy counsel for the Coastal Commission, said he thinks “we will prevail on this.”

“I think this court (and Judge Nadel) has vindicated what we’ve been saying all along,” Helperin said. “This entity, or whatever you want to call it, is not actually functioning as a common carrier and is not eligible for the kinds of exemptions it is claiming.”

Excursions into the woods

A still-unresolved tunnel collapse three miles outside Fort Bragg prevents running trains between the coast and Willits, 40 miles to the east, but the railway has been running excursions into the woods from both ends, as well as rail bike trips.

It also has been looking for opportunities to haul freight, which would aid efforts to acquire grant funds for tunnel repair and bolster its standing as something more than an excursion train. Pinoli testified in the Meyer case that 90% of its revenue comes from excursions.

Last year, though discussions were dominated by a mysterious proposal to take over the north-south railroad line from Willits to Eureka for coal transport out of Humboldt Bay, Mendocino Railway also pitched a proposal to rehabilitate 13 miles of rail line from Willits to Outlet Creek so it could haul gravel.

The move would have interfered with the Great Redwood Trail Agency’s plans to “bank” the rail, or take it out of commission, and convert it to a 320-mile multiuse hiking, biking and equestrian trail running from San Francisco Bay to Arcata in Humboldt County.

The federal Surface Transportation Board rejected the bid, saying the railway couldn’t demonstrate sufficient funds or plans to raise revenue for millions of dollars in repairs needed in an area likely subject to future landslides and continued storm damage.

The Great Redwood Trail is now embarking on the next stage of rail banking from Willits south to Cloverdale, which would sever Mendocino Railway’s link with any interstate rail lines, Caryl Hart said.

“They’ve been trying very hard to do everything they possibly can, in every case, in every angle, and so far they have not succeeded. And this is very latest round,” she said.

Pinoli said the Trail effort “really is a shot to put the California Western Railroad/Skunk Train out of business,” depriving residents of a cleaner alternative to moving all freight by truck.

State Senate Majority Leader Mike McGuire, D-Healdsburg, a champion of the Great Redwood Trail, said Nadel’s ruling “was as clear as a bright spring day here on the North Coast: The Skunk Train is not a freight train. The Skunk Train is not a public utility. They are a beloved North Coast excursion train that whisks locals and visitors alike through the gorgeous redwoods on the Mendocino Coast.”

You can reach Staff Writer Mary Callahan (she/her) at 707-521-5249 or mary.callahan@pressdemocrat.com. On Twitter @MaryCallahanB.